Why manufacturers need to manage Pricing, Contracts and Quotes

Pricing and contract compliance are two prime areas in which manufacturers can improve profitability and perfect-order performance by taking advantage of the automation capabilities of flexible CRM solutions.

This process includes price and contract management, which is another key area that impacts profit and revenue directly within an organization.

Price Management Comprises Three Steps:

1. Price Optimization: Determining the highest price the market will bear
2. Price Execution: Rolling out optimized pricing across various channels
3. Price Enforcement: Making sure that the right prices are quoted to the right people at the right time, across channels, products, and company tiers

Even if an organization optimizes prices effectively at the back end, it will not make a difference to the business if these prices are not accurately applied by the people who are creating quotes in the field.

Contract Management Comprises Two General Stages:

1. Executing the contracts
2. Enforcing contract compliance across channels

By this definition, contract management emphasizes not only the establishment of the contract, but also the management of its expiry, renewal, and renegotiation.

Sales managers often have the ability to discount pricing based on a variety of parameters, and they may also be able to apply an overall discount to the sale at their discretion. Unfortunately, typically these discounting procedures are inconsistent and poorly managed. Since there is often little visibility into this process, it can result in excessive discounting that cuts into profit margins and the company’s bottom line.

The impact of inefficiencies in price management is larger than many manufacturers realize. As experts in the Manufacturing industry, we’ve recognized that the vast majority of companies do not currently manage prices effectively.

Using a flexible CRM system to implement an approval process for pricing and discounting of complex products can ensure that only profitable quotes are extended to customers. These processes make sure salespeople quote the most appropriate price for each product, while keeping on top of price breaks and volume discounts, ensuring accuracy and competitive pricing while ultimately preventing margin erosion.

Automating the quote-to-order process from end to end ensures accuracy and unimpeded workflows. Beyond that, it cuts down on the time spent entering, approving, and processing quotes and orders. Subsequently, orders and project-related data are documented within a centralized CRM system that is easy for your employees to navigate and obtain data right at their fingertips. As a result, employees can now identify the source of order delays and deal with them accordingly.

The importance of accuracy in quoting and order processing cannot be overstated. For companies that handle quote-to-order processes manually, a simple clerical error in your company’s revenue expectations can spell doom for your company. With a CRM system in place, the chances of such an error occurring are dramatically reduced.

Some companies are surprised to discover what they are overlooking due to lack of visibility into their processes. You do not want to be in a position where you have shipped a number of orders for which it has not yet invoiced customers, meaning money is being left on the table. Similarly, staff needs to be alerted in advance of contract expirations so they can proactively renegotiate the terms of the contracts and renew expiring contracts. By ensuring that your company automates its order capture, order processing, order fulfillment systems, and is integrated with your backend ERP system, you will never be left in the dark when dealing with shipment and contract extensions.

Using a CRM solution allows companies to track the start and end dates of contracts, as well as revenue events. Using this information, the system automatically creates a new opportunity a few months before the contract expiration date and assigns it to an account manager for follow-up. The account manager can then either renew the existing contract or negotiate a new one, and in the process, he or she can also up-sell and cross-sell additional products, obtaining extra revenue and profit. Commencing months before the contract expiry date ensures there is adequate time to troubleshoot problems and pursue opportunities in time to meet the existing contract deadline.

Not only is it important to use your CRM system to manage contract compliance and contract expiration, but sometimes there are also other revenue-generating events that take place over the lifespan of a contract that need to be managed. For example, many manufacturers have contract stipulations that give them the right to increase the unit price by five percent per annum on the condition that they inform the client 30 days in advance. Managing such a process with a CRM system can help companies earn additional revenue with very little effort.

By using an automated CRM system that utilizes price variant books, product and price lists are automatically updated and distributed within the CRM system, so the sales force is confident it is providing the most appropriate and accurate pricing in its quotes. Companies will now be able to effectively manage discount thresholds by implemented a discount-approval process to ensure it is maximizing the value of each quote while maintaining quote accuracy. Another example of a manufacturer benefiting from using a CRM solution for pricing management is a full-service OEM and contract manufacturer that serves the medical-device industry. CRM removes any errors or disparity from quotes that were manually processed and routed through an administrator for typing.

Using CRM, companies ensure automating their quoting process can be done without the help of administrator or an engineer to help put the quote together, and it now takes less time and effort for sales representatives to create a quote. Even in the case of complicated, customized quotes, hours is now the typical timeframe for getting quotes to customers, rather than several days.

In an industry filled with challenges and pitfalls that can cause inefficiencies and hamper revenue at every turn, managing pricing, quoting, and contract management are key areas in which manufacturers can see benefits from CRM. But the full potential of CRM extends far beyond these areas. As manufacturers begin to see the benefits of using CRM to automate these processes, they can also begin to explore the many other areas in which CRM can have an impact and to look at the next steps needed to implement a holistic CRM strategy.

How Tokara Solutions is Ready to Help You Get the Most out of Your CRM: 

The business landscape is anything but static. Having a fully integrated, end-to-end CRM for every step in the customer journey is essential for any business looking to achieve the most while maintaining an ease of mind! Tokara Solutions offers help in providing the best CRM for you and your company! With an average of over 18 years of CRM consulting, Tokara’s wealth of knowledge in integrating and maintaining CRM systems is rooted in our devotion to supporting small, medium and large manufacturing enterprises.